The index has now tapered to around 18,000 levels. The reason - US equity markets recovered earlier than expected and Indian stocks are seen as over-valued.
In three months, foreign institutional investors (FIIs) pulled out US$1.7 billion.
Sunil Shah, Director of Khambatta Securities, said: "North America and Europe are reviving and are doing well. So definitely some capital will go these countries. Then the Asian economies, which are highly dependent on the European and the US economies, they would do well because of this economic revival. So some capital will go to these countries like Taiwan, Korea and Asia Pacific."
India's investment climate seems to have become unfavourable, with no clear policy on taming inflation. The Reserve Bank of India raised its forecast on inflation for the third time, currently projected at 8 per cent.
For Indian companies, the higher cost have put earnings under pressure, making them an unviable investment option.
Corruption scandals have also put the government's reform agenda under a scanner.
Ashok Ajmera, Chairman and Managing Director of Ajcon Global Services Pte Ltd, said: "Lot of such things are going on, which we have not heard of in the last five to 10 years. The kind of corruption cases, with the 2G scam, Commonwealth Games. Everyday, we hear one or the other person being rounded up. So markets don't like these kind of uncertainties and actions. So that is the reason FIIs are not coming in a big way to buy because they also want to local position to settle down."
This year, FII inflows are expected to fall by a third as compared to last year.
Bombay Stock Exchanges' Sensex fell below 18,000 levels after India's central bank raised interest rates for the eighth time in a year recently. That day's session saw FIIs logging a net outflow of about US$250 million. There is a possibility of more hikes as the bank fights inflation. With this, stocks of auto, real estate and consumer durables will be the hardest hit as they are most sensitive to interest rates.source www.channelnewsasia.com... For the latest updates PRESS CTR + D or visit Stock Market news Today
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